Mining giant GVK is going ahead with its $10.6 billion planned projects west of Rockhampton despite concerns the gas boom will jeopardise coal.
Coal briefly became expensive after the discovery and profusion of shale gas in the United States. The US market was filled with inexpensive energy supplies. This meant US coal reserves were available for export.
This posed direct competition with Australia’s coal exports from NSW and Queensland, with the extra stock further reducing coal prices, which were already under pressure.
But GVK will profit even when coal prices are dipping due to its low cost structure. The company is developing the Alpha and Kevin’s Corner mines in the Galilee Basin through GVK Hancock Coal.
The two mines will be connected to a new terminal at the Port of Abbot Point near Bowen. This will be linked by a 500 kilometre rail line, which GVK will build with Aurizon.
Even if coal prices fall to around $95 from $115 a tonne, GVK could still profit if it can produce at its $55 per tonne goal, The Morning Bulletin reported.
GVK boss Paul Mulder told APN demand would gradually increase as the gas boom increased, which meant gas prices would rise.
Coal would remain a feasible option under these circumstances, he said.
“While (gas) will be used by Asian developing economies, coal is still very reliable. When you’re looking at cost, it is still the most reliable and cheapest as a base load.”
The International Energy Agency agrees with Mulder’s assessment and sais its use ‘has never stopped increasing and the forecasts indicate that, unless a dramatic policy action occurs, this trend will continue into the future”.
Mulder last week hit back at environmental criticisms from a Greenpeace report, saying it was immaterial because GVK was operating above the world's best environmental benchmark.
Alpha mine is set to begin within a year, with first coal mines in 2017. GVK Hancock is predicting Alpha, Kevin’s Corner, the new terminal at Abbot Point and the 500 kilometre rail link will generate up to 8000 jobs.
The Queensland state government approved Kevin's Corner earlier this month despite a coordinator-general's report warning nearby groundwater supplies would 'be permanently lost'.
Kevin's Corner will supply 30 million tonnes of thermal coal a year, using Abbot Point port near Bowen.